John Cleary overcame fires, bankruptcy and mistakes to establish a successful recycling company.

By Enterprise StaffDate Posted: 8/8/2001

UNION, Illinois — There is a saying that goes something like, ‘there are no second chances in life.’ John Cleary is proving it wrong.

John has overcome fires, bankruptcy, and his own mistakes, rebounding and calling on his wealth of experience in the pallet industry to establish a successful pallet recycling company outside Chicago, Cleary Pallet Sales Inc.

Although he only went as far as the 10

th grade in high school, he learned some valuable lessons in the Marine Corps that he still applies to business, and he went back to earn a general equivalency diploma. He also received a thorough education in the pallet industry and the school of hard knocks.

John also displays a unique grasp of people and their abilities, takes an unusual approach when it comes to pallet machinery, and is deeply committed to maintaining the profitability of his company as well as serving its customers.

As he has learned, grown and changed, the pallet industry has too, John noted. "Twenty-five years ago you could get into this business and become a millionaire," he said. "Today you can earn a comfortable living. The days of getting rich are gone."

Cleary Pallet Sales is based in the village of Union, about 60 miles west of Chicago. The company has 20 employees, including several members of John’s extended family. Cleary ships about 11,500 pallets per week and has annual sales of about $3 million.

Although the company markets its pallets as used, most of them — about 80% — are made with new lumber. Cleary buys a considerable volume of No. 2 pallet lumber — in mixed hardwoods — from sawmills in such states as Missouri, Kentucky, Tennessee, Alabama, Indiana, Michigan, Wisconsin, Minnesota and Canada. John buys some cut stock, random length lumber and cants — "whatever is available at a low price." In addition, Cleary reclaims used lumber from its pallet recycling operations. Finished pallets may be made with either new or used lumber or both.

The company’s principal market area is within a very small radius — 35 miles — although it also ships some pallets to Wisconsin. Union is a village of only about 600 people, a bedroom community where many residents commute to nearby Rockford to work. The area surrounding Chicago, however, supports many manufacturing businesses.

Cleary has more than 150 customer accounts. "All of them are very different," said John. Some of the industries they represent include steel fabrication, display makers, and plumbing fixtures.

Growing up and attending a Catholic high school, John was an admitted class clown. "I thought I knew more than the nuns did," he said. "They had nothing I was interested in — no auto shops, no wood shops. Hitting the books was not my thing." He joined the Marines at age 17.

John played football in the Marines and played with a semi-pro team — as tackle and guard — for three years when he came out of the military. After four years in the Marines he began working as a driver for a trucking company. At the time, in the 1960s, a great deal of goods that were being shipped by manufacturers were still being floor-loaded, he recalled. In fact, he estimated that, in his experience, about 90% of shipments were floor-loaded.

As years went by, however, more products were being palletized, and he began noticing signs at manufacturers that said, ‘we buy pallets.’ "I thought this might be something to pursue," said John.

A customer complained to John that he was having difficulty finding a supplier to repair pallets, and John offered to do it for him. He started repairing and building pallets in his spare time in 1979.

His wife at the time discouraged John’s entrepreneurship. "She was happy with me working 40 hours a week, getting a paycheck, and the security of working for someone else. She didn’t want me to start my own business. She would say, ‘Do you think you need that saw? Do you need all that lumber?’ "

Within a year, though, John had taken on a partner — they called the company J&L Pallet, and was devoting his full time to the new business. The partners grew the company for nine years. During that time the business suffered through several fires. The partners filed for bankruptcy following a fire in 1989.

J&L had been a learning experience, though. His own mismanagement probably contributed to the company’s demise, John conceded. "At the time, I never said no to anybody. My sales area was too big, and that inefficiency cut into our profit margins."

A pallet brokerage business bought J&L’s assets, and John went to work for them as a salesman. He brought to his employer the many contacts he had with pallet-using companies around Chicago and helped to grow sales, continuing to learn more about the pallet industry. Within two years John was earning a six-figure income in sales. Apparently, it was too much. "I walked in on my birthday, August 12

th, and I was fired," he recalled.

He called a friend in the pallet business, Brian Castino, owner of Skid Recycling in Bellwood, Ill. "I had a job with him that afternoon," said John — along with a 10% increase in commissions. That was 1991.

Four years later, his daughter, Tina Blouin, convinced John to launch his own company again. Her husband, Mark, had played professional hockey for 14 years but now was looking to start another career.

John went to Brian and they agreed on a unique business arrangement. John would start his own business, focusing in a market area that was outside the market region of Skid Recycling so that he would not compete against Brian. At the same time, John would continue to sell for Skid Recycling. They have continued that business relationship.

"I learned a lot from Brian as far as not over-extending yourself," said John. Brian had developed Skid Recycling by focusing on a small market area — Chicago and its closest suburbs. John lived — and had worked — about 50 miles west of Chicago. "I had a lot of contacts there, but he didn’t want to do business there," said John, "because it was too far out."

Cleary Pallet began operating out of rented facilities in 1995 but last year built a new, 20,000 square-foot-building on four acres, all of it paved. The two-story structure has offices over the shop and 10 loading docks. Lumber is stored both inside and on the yard.

Several members of John’s family and extended family are involved in the business. Son-in-law Marc oversees all aspects of transportation, including coordinating and staging loads and shipping. Step-son John DeWindt supervises production. A daughter, Wendy Magee, is office manager, and her husband, Mark, is in charge of maintenance.

For remanufacturing lumber into pallet parts, Cleary is equipped with a pair of Brewco horizontal band resaws and two chop saws supplied by Heartland Fabrication and Machine. The latest addition is a Holtec package saw, which John raved about. "I love it," he said. "I have a sign on it that says, ‘3 amigos.’ The Holtec takes the place of three men, John explained, freeing them up to be assigned to other operations. Cleary also has a Fastline double-head notching machine.

For reclaiming used lumber, the company uses two band saw dismantling machines. Used lumber is cut to length on two end trim saws from Saw Service and Supply.

The company does not provide repair services, but Cleary buys a large volume of used GMAs, refurbishes them, and resells them. For pallet repairs, Cleary has an Eagle plater for restoring damaged stringers.

Pallets are assembled by hand. Workers assembling pallets are paid according to a piece rate. They work at custom-built tables — made by John — that swivel. Each work station has a section of Pallet Repair Systems roller-conveyor on which the finished pallets are stacked.

John buys new equipment regularly, replacing the old. He replaces machinery every five years. "By buying new equipment, I am not buying someone else’s problems," explained John. "I don’t care if it runs perfect. I change it in five years." After that length of time, he has found, "you start having minor problems." Running new equipment reduces maintenance and down time, he noted. "Down time is real important in this business," he added.

John makes a practice of investing in the same type of machinery from a single supplier — buying both chop saws from Heartland, the three end trim saws from Saw Service and Supply, and the two band resaws from Brewco. Dealing with the same supplier makes it easier to keep track of parts and maintenance. "If I have three different chop saws and three different manufacturers, I have to stock three different type of parts," he explained.

John does not see any benefit from automating pallet assembly operations at Cleary. "For the type of material we are using, hand assembly is best," he said. "We would have too much down time" with a nailing machine.

Cleary pallet builders assemble an average of 400 pallets daily. All materials are staged for easy access at each work station. Pallets are stacked by hand, 15 high. "We used to stack them 20 high," said John. "Now we let the forklift do the work, and found that production is higher."

Cleary uses New Supply Co. power nailing tools that are supplied and serviced by New Supply Co. in Orland Park, Ill. "I have been dealing with this same man for over 20 years," said John. "I don’t change suppliers. He gives the best deal, the best service, so I have no reason to shop elsewhere."

The company also does a considerable business in fairly small orders. It fills orders for trailer-loads, but it also takes a lot of orders for 120 pallets. "We charge delivery on anything less than 120 pallets, so 120 is the minimum order" for free delivery, said John.

Cleary has a fleet of 42 trailer vans but only one tractor. Besides being used to ship pallets and retrieve used pallets, Cleary also uses some trailer vans for storing finished pallets so they are ready to go. The company contracts with two truck owner-operators who furnish their tractors, paying them hourly plus mileage. They store their tractors at Cleary, which also gives them room for storing spare parts and servicing the vehicles.

The trailer vans are moving billboards to promote and advertise Cleary. "I spent $1,300 per trailer to have our name put on them — front, back and sides," said John. The company’s pick-up trucks and Ford F450, which is used to pull gooseneck trailer loads, are similarly adorned with the Cleary name and phone number. The two goosenecks come in handy, John noted. "We pick up a lot of slack with them — little orders people need in a rush, small orders that I don’t want to tie up the semis."

Recycling scrap and waste material is an important aspect of Cleary operations. "We recycle 99 percent of everything that goes out of this building," said John. The company uses a Cresswood grinder to process scrap wood — like trim ends from new lumber — and the grindings are marketed and sold as horse bedding. With three nearby horse racing tracks and horse farms to support them, it is a good market for the grindings.

Used pallet lumber with nails or nail stubble is hauled away in a company dump truck to another business that grinds the wood and removes the metal with magnets, marketing the grindings for playground surfaces.

Some scrap wood is saved to burn in a Cresswood furnace that completely heats the building. The company has a central heating system but doesn’t have to use it much thanks to the Cresswood wood-burning furnace. Last year’s heating bill was under $5,000.

Scrap cardboard is baled and sold to another recycling business, and Cleary has a Viking band cutter for chopping up metal bands, which are collected and sold to a scrap yard.

Cleary keeps a fully stocked maintenance department for ordinary and preventive maintenance. "We have...at least one of every part we need," said John. "If a belt goes, we can replace it in 10 minutes — fuses, anything."

The Cleary staff keeps the shop meticulously clean. At the end of the day, they break out the dust mops. "Every day before we go home, my shop is completely cleaned. They take the dust mops and hit the floors. We probably have one of the cleanest pallet shops in Illinois." The reason John is such a stickler when it comes to cleaning: dust. "Dust causes problems," he said, and contributed to one of the fires J&L suffered years ago.

John apparently has a good eye for people and their abilities. Although he continues to do some selling, a couple of years ago he recruited Sherrey Meyers to sell for Cleary. She was a waitress at a restaurant where John sometimes ate. "She had a such a gift of gab...She was a natural." She spent time in the shop first, learning the business. "She is a good talker, she likes to have the last word, and she is persistent," said John. "She has been very good for us."

His experience in the Marines has been helpful in managing people and running a business, said John. "I like to be firm but fair with my employees. I treat them good...I treat them the way I want to be treated." Workers are cross-trained. "I can take anybody in my shop and put them on any job, and they can do it." He pays his employees somewhat more than other pallet companies, he said. "My experience is that people try to hire help as cheaply as they can, and they end up with cheap help." The higher wages and ethic toward employees has kept turnover at a minimum; one worker has been associated with John about 20 years.

Providing good, consistent service to customers is integral to the success of a company that manufactures and repairs pallets, John suggested. "A lot of it is service." One Cleary employee calls existing customers every week to determine their pallet requirements for the next week. "Half will say, ‘we’ll call you,’ " said John. "Nobody wants to cooperate. They put the burden on the pallet supplier." So the company has to anticipate customer requirements and plan ahead. "You have to have the proper inventory and manpower to take care of these kind of last-minute demands," said John. "The customer is always right, but they are always the customer. I can hang up the phone and yell and scream, but not at the customer."

John has no immediate plans to retire — "I love what I’m doing" — and projects the company to continue to expand, to grow as much as 25-30% for the next several years. He has five grown children. He and his wife, Pat, have a condominium in Pompano Beach, Fla. Pat spends the winters there and John goes down during the winter as he can. "I like to go charter boat fishing," he said. He previously coached youth football for 14 years.

John likes to travel for business. He attends trade shows and also likes to call on the sawmills that supply him with lumber. " I love to take off a week and call on sawmills," said John, a member of the Missouri Forest Products Association. "I envy the guys in the lumber business. I think it’s fun." He recently bought a used sawmill "for fun" although he also plans to incorporate it into Cleary’s operations.

Over the years, John has tried to learn from his business mistakes, change accordingly, and move on. One mistake he made earlier: retrieving too many excess pallets from customers that he could not use, and not charging them anything. "I ended up with a junk yard. Now, I take them only if they are stacked neatly and I can unload them with a forklift. If people call me with scrap pallets, I charge them. I’m a pallet man, not a junk yard."

In his numerous visits to sawmills — he has visited more than 200, he estimated — he has sought to quickly assess their strengths and weaknesses and to apply them to his business. "When I walk in somewhere, if it is neat and orderly, they are probably making a profit."

The sagging economy — and the response of some pallet companies — has made the business climate difficult recently, John noted. The first thing some pallet suppliers do when business slacks off is to lower prices. "It’s taken 15 years to get prices where you can make a fair profit, and in 15 minutes they knock it down where it was 15 years ago. "My fuel, electric bill, and everything else have not gone down."

Competitors who sell cheap "are killing the industry," he added. "They are letting purchasing agents dominate the business. I can only say it one way: they don’t have guts enough to stand up for themselves. I think it’s going to hurt the pallet industry. It’s taken us too long to get here."

Cleary faces competition from "a lot of backyard people operating without insurance and low overhead." Cleary is fully insured, and the company uses that distinction as a selling tool with low-ball competitors. "I stress to customers that I have insurance," said John. "If they deal with someone who sells them pallets 50 cents cheaper...tomorrow that guy could be in business under a new name. Insurance becomes a sales tool for me."

"I have not lowered my prices," John added. "Let the competition beat themselves to death on customers who will not give them a fair profit. My business has not gone down a bit. I just want fair profit for a fair product."